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401(k) Retirement Account: a defined contribution plan where an employee can make contributions from his or her paycheck either before or after-tax, depending on the options offered in the plan. The contributions go into a 401(k) account, with the employee often choosing the investments based on options provided under the plan.
A
Abatement: The reduction or decrease in the amount of a bequest because of a lack of sufficient assets in the estate to pay the bequest in full.
Ademption: When the property listed in the will is no longer in the testator's estate when the testator dies.
Administrator: An individual or institution appointed by a court to settle the estate of a person who died without a will.
Advance Directive: A legal document that specifies the type of medical treatment an individual wants – or does not want – if they become unable to make their own decisions.
Affidavit of Domicile: a notarized document issued by a governing court that verifies where a deceased person resided at the time of death.
B
Beneficiary: The person or entity (such as a charity) that is named in a will to receive a portion or all of an estate.
Bequest: A gift left to someone in a will.
Brokerage Account: an arrangement between an investor and a licensed brokerage firm that allows the investor to deposit funds with the firm and place investment orders through the brokerage.
Bypass Trust: Also known as a credit shelter trust, this trust is designed to help affluent couples maximize the estate tax exclusion amount for both spouses.
C
Caveat: A formal notice or warning given by an interested party to a court, judge, or ministerial officer against the performance of certain acts within his power and jurisdiction.
Charitable Trust: A trust established to benefit a particular charity or the public.
Chattel: An item of property other than real estate.
Codicil: A supplement to a will that can make changes or additions and explain or modify its provisions.
Community Property: A system of property ownership based on the theory that each spouse has an equal interest in the property acquired by the efforts of either of them during marriage.
Conservator: A person appointed by a court to manage the estate or personal affairs of another due to physical or mental limitations.
Credit Shelter Trust: A trust designed to allow a spouse to leave the maximum amount of assets to heirs (beyond the marital deduction) without having to pay federal estate tax.
Creditor: A person or institution to whom the deceased person owed a debt.
Crummey Trust: An estate planning strategy that enables parents to make lifetime gifts to children without the gifts being treated as taxable gifts.
D
Death Certificate: a certificate signed by a doctor, giving pertinent identifying information, such as age and sex, about a deceased person and certifying the time, place, and cause of death.
Decedent: A person who has died.
Devise: Real property left in a will.
Digital Assets: Digital property including, but not limited to, digital accounts, intellectual property, and computer files.
Disclaimer: The refusal to accept an interest in or power over property.
Distribution: payment in cash or asset(s) to one who is entitled to receive it.
Durable Power of Attorney: A type of power of attorney that remains in effect even if the person becomes incapacitated.
Dynasty Trust: A long-term trust created to pass wealth from generation to generation without incurring estate taxes.
E
Elective Share: A statutory right that provides a surviving spouse with the option to accept what the spouse was left under the deceased spouse’s will or instead to claim a share of the deceased spouse’s estate as provided by state law.
Escheat: The process by which a deceased person's property reverts to the state if there are no legal claimants or heirs.
Estate Account: a bank or brokerage account that is set up and opened specifically for the purposes of administering a person’s estate after they have passed away.
Estate Freeze: A strategy to lock in the current value of your estate so any future growth and taxes are transferred to others, typically to the next generation.
Estate Inventory: A detailed list of all the property in the estate.
Estate Liquidation: The process of converting the estate's assets into cash to pay off the deceased person's debts.
Estate Planning: The act of preparing for the transfer of a person's wealth and assets after his or her death.
Estate Tax: A tax on your right to transfer property at your death.
Estate: All the property, assets, and debts left by an individual at death.
Executor: Also known as a personal representative, this person is appointed in the will to carry out the wishes of the deceased.
F
Family Allowance: A small amount set aside from the estate that is used to support the decedent's dependents during the estate administration process.
Family Limited Liability Company (LLC): A type of entity that is similar to a family limited partnership, but offering more flexibility and liability protection.
Family Limited Partnership (FLP): A type of partnership designed to centralize family business or investment accounts, provide for the orderly transfer of wealth to younger family members, and reduce tax liability.
Federal Tax Identification Number: also known as a Employer Identification Number (EIN), it is used to identify a business entity. It is also used by estates and trusts that have income which is required to be reported on Form 1041, U.S. Income Tax Return for Estates and Trusts.
Fiduciary: A person who is required to act for the benefit of another person on all matters within the scope of their relationship.
Form W-2: the form that an employer must send to an employee and the Internal Revenue Service (IRS) at the end of the year. The W-2 form reports an employee's annual wages and the amount of taxes withheld from his or her paycheck.
G
Generation Skipping Transfer (GST) Tax: A tax levied on both outright gifts and transfers in trust to or for the benefit of unrelated persons who are more than 37.5 years younger than the donor or to related persons more than one generation younger than the donor, such as grandchildren.
Gift in Contemplation of Death (Donatio Mortis Causa): A gift made by a person when they consider themselves likely to die soon, usually of a particular illness or going on a particularly risky journey, which is to take effect on their death.
Gift Tax: Tax on the transfer of property by one individual to another while receiving nothing or less than full value in return.
Grant of Probate: A legal document which confirms that an executor has the authority to deal with the deceased person's assets.
Grantor Retained Annuity Trust (GRAT): A type of irrevocable trust that allows the grantor to contribute assets into the trust and then receive a fixed annuity payment each year.
Gross Estate: The total property held by an individual as defined for federal estate tax purposes.
Guardian: An individual appointed to look after the affairs of a person incapable of doing so for themselves, such as a minor child.
H
Health Care Proxy: A person appointed to make healthcare decisions for another when that person is unable to do so.
Heir: A person who is legally entitled to inherit some or all of the estate of another person who died without leaving a will.
HIPAA Release: A document that allows healthcare providers to release your health records to the person named on the form.
Holographic Will: A will and testament that has been entirely handwritten and signed by the testator.
I
In Terrorem Clause: Also known as a "no-contest clause," it is a provision in a will or trust which is designed to threaten anyone from challenging the document.
Inchoate: Something that has begun but is not completed, or rights that are not yet fully vested.
Incorporation by Reference: A doctrine of law that allows a document to be part of a will without being physically present at the time of the execution of the will.
Independent Administration: A simplified probate procedure available in some states that does not require the probate judge to authorize certain actions taken by the executor or administrator.
Individual Retirement Account (IRA): an account set up at a financial institution that allows an individual to save for retirement with tax-free growth or on a tax-deferred basis.
Inheritance Tax: A tax paid by a person who inherits money or property from a deceased person.
Inheritance: the assets received from someone who has died.
Inheritor: a person who inherits something; an heir.
Inter Vivos Gift: A gift made during the giver's life.
Intestacy: the state or condition of dying without having made a valid will or without having disposed by will of a segment of the property of the decedent.
Intestate Succession: The order of who inherits the property if the deceased did not have a will.
Intestate: When someone dies without leaving a will.
Irrevocable Trust: A type of trust that can't be changed or terminated without the permission of the beneficiary.
J
Joint Tenancy with Rights of Survivorship (JTWROS): A type of property ownership where two or more individuals jointly hold a property with equal rights during their lifetime, and the surviving owner continues to maintain full ownership after the death of other owners.
Joint Tenancy: A type of ownership where two or more people share equal ownership of a property and have the equal, undivided right to keep or dispose of the property.
Joint tenants with right of survivorship (JTWROS): a type of brokerage account owned by at least two people, where all tenants have an equal right to the account's assets and are afforded survivorship rights in the event of the death of another account holder.
K
L
Last Will and Testament: a legal paper that lists a person's wishes about what will happen to his or her personal property after death.
Legacy: A gift of personal property left to someone in a will.
Legatee: The person who receives a legacy.
Letter of Instruction: An informal document that provides additional and personal instructions regarding a person’s estate plan.
Letters of Administration: A legal document issued by a court that allows an administrator to settle the estate of a person who died without a will.
Letters Testamentary: certified documents that prove you have the legal authority to act on behalf of the estate to begin the process of paying bills, filing tax returns, managing and distributing assets, dealing with beneficiaries, and opening or closing bank accounts.
Life Estate: A right of a person to use and enjoy certain property during their lifetime, with the property going to another person upon their death.
Life Insurance Trust: An irrevocable, non-amendable trust that is both the owner and beneficiary of one or more life insurance policies. Upon the death of the insured, the trustee invests the insurance proceeds and administers the trust for the beneficiaries.
Living Trust: A trust set up during a person's lifetime that allows the person control over their estate while they are still alive.
Living Will: A legal document that specifies what actions should be taken for the person's health if they are no longer able to make decisions for themselves.
M
Marital Deduction: A provision that allows for unlimited transfers of property between spouses without tax consequences.
N
Non-probate Assets: Assets that pass to a beneficiary without the necessity of probate. They can include such items as joint bank accounts, life insurance policies, and retirement accounts.
Nuncupative Will: An oral (spoken) will.
O
P
Per Capita: A legal term meaning that each individual in the same generation of a family will receive an equal share of an estate.
Per Stirpes: A legal term meaning that each branch of the family will receive an equal share of an estate.
Personal Representative: the person who administers the estate of a deceased person as executor or Court-appointed administrator.
Pour-over Will: A will that directs that any assets not otherwise included in the will-maker’s trust should be transferred to the trust upon the will-maker's death.
Power of Attorney: A legal document giving one person the power to act for another person.
Premium: an amount to be paid for an insurance policy.
Principal: The assets that are put into a trust.
Probate Assets: Assets that were owned solely by the decedent at the time of death.
Probate Court: A type of court where probate and estate matters are handled.
Probate: The legal process where a will is reviewed to determine whether it is valid and authentic.
Q
Qualified Personal Residence Trust (QPRT): An irrevocable trust that removes the value of your home or secondary residence from your estate, and which can be especially useful when your home is likely to appreciate in value.
Qualified Terminable Interest Property (QTIP) Trust: A type of trust that allows a grantor to provide for a surviving spouse and also maintain control of how the trust's assets are distributed once the surviving spouse dies.
R
Real Property: Land and anything permanently affixed to it, such as buildings, trees, minerals, fences, and others.
Realized Gain: the result of selling an asset at a price higher than the original purchase price.
Realized Loss: the result when assets are sold for a price lower than the original purchase price.
Remainderman: A person who inherits or is entitled to inherit property upon the termination of the estate of the former owner. Usually this is a person who is entitled to a remainder interest in some type of deferred-income arrangement, such as a trust.
Renunciation: The formal rejection of a claim or right.
Residuary Estate: The part of the deceased's estate that remains after paying all debts, costs, and legacies.
Revocable Trust: Also known as a living trust, this type of trust can be altered or canceled during the grantor's lifetime.
S
Settle an Estate: the process of handling the final affairs (valuation of assets, payment of debts and taxes, distribution of assets to Beneficiaries) after someone dies.
Settlor: The person who creates a trust. Also called a grantor, trustor, or trust maker.
Small Estate Proceeding: a probate case for an estate worth less than an amount specified by law.
Sole Proprietorship: A business owned and managed by one person, with no distinction between the business and owner.
Special Needs Trust: A specific type of trust that is designed to benefit a person who has special needs while not compromising their eligibility for government benefits.
Spendthrift Trust: A trust that is set up for the benefit of a person often unable to control their spending.
Stepped-up Basis: assets are given a new basis when transferred by inheritance (through a will or trust) and are re-valued as of the date of the owner’s death. If an asset has appreciated above its basis (what the owner paid for it), the new basis is called a stepped-up basis. A stepped-up basis can save a considerable amount in capital gains tax when an asset is later sold by the new owner.
Succession: The order in which or the persons to whom property of a deceased person passes by law.
Successor Trustee: person or institution named in the trust document who will take over should the first trustee die, resign, or otherwise become unable to act.
Surrogate’s Court: the court that has power over the affairs of someone who has died, guardianships, and oversees fiduciaries.
T
Tangible Personal Property Memorandum (TPPM): A legally binding document referenced in the will that allows the testator to leave specific personal property to certain beneficiaries.
Tax Loss Harvesting: a strategy of selling securities at a loss to offset a capital gains tax liability.
Tenancy by the Entirety: A special type of joint ownership that's recognized in some states and that can only exist between a husband and wife.
Tenancy in Common: A type of concurrent estate with no right of survivorship; each co-tenant's portion is distributable under a will.
Tenant in Common: a tenant in common holds property together with other tenants in common, but none of the tenants automatically inherit the shares of a tenant who dies. Each tenant holds an equal share of the property unless the property title specifies otherwise. Upon the decedent’s death, his or her share becomes subject to probate, even though in some states actual title to real estate (if that is what they’re holding) passes to the heirs as of the decedent’s death.
Testacy: The condition of leaving a valid will at death.
Testator: The person who creates a will.
Title: document proving ownership of an asset.
Totten Trust: A type of trust in which a depositor places money in a bank account with the intention that when the depositor dies, whatever is in that account will pass to a named beneficiary.
Trust Protector: A person appointed under a trust instrument with the authority to influence the actions of the trustees and other persons involved with the trust.
Trust: A legal arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries.
Trustee: an individual person or member of a board given control or powers of administration of property in trust with a legal obligation to administer it solely for the purposes specified.
U
Undue Influence: When an individual is directed to act against their free will due to the manipulation of a confidant.
Uniform Gifts to Minors Act (UGMA): A law similar to the UTMA, but with more limitations on the types of property that can be transferred, and often with different age requirements for the termination of the custodianship.
Uniform Probate Code (UPC): A set of model laws drafted by the National Conference of Commissioners on Uniform State Laws that provides a system for managing the estate of a deceased person.
Uniform Transfers to Minors Act (UTMA): A law in some states in the United States that allows assets such as securities, where the donor has given up all possession and control, to be held in the custodian's name for the benefit of the minor without an attorney to prepare trust documents or the court’s involvement.
V
Virtual Representation: A legal principle that allows the court to consider a beneficiary's interest in a trust as represented by another when the beneficiary is unable to represent his or her own interest.
W
Will: A legal document that dictates how an individual’s estate will be distributed after their death.